Chidambaram's Reforms Come for Praise

"In a democracy, reform - be it of economic policy or of institutions - is essentially a political process. We have to build a sufficiently wide political consensus in favour of the policies we wish to adopt. Having a parliamentary majority alone is not enough, because there are differences within parties. For reforms to be credible it is necessary that a wide cross section of society should understand the need for and accept the policy changes that a government wishes to introduce." - Manmohan Singh, Prime Minister

These words by Prime Minister Manmohan Singh sum up the spirit of change that is sweeping the country. The occasion was the release of the book – An Agenda for India’s Growth: Essays in Honor of P Chidambaram, edited by Skoch Group Chairman Sameer  Kochhar.

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“As the finance minister, he did almost an experimental economics showing that by lowering the rates of taxation, the revenues can increase. People have talked about it but I think we had a practical experience of this under Mr Chidambaram.” 
— C Rangarajan, Chairman, 
Economic Advisory Council to the Prime Minister

“We in India have begun to 
expect that when Chidambaram 
is home minister then 
something will happen. 
When he is the finance 
minister, then something 
will happen.” 
— Arun Maira, 
Member, Planning Commission

“I think it is useful to question a party that has him (Chidambaram) in two very important roles – twice as the finance minister and once as the home minister – as to why policies have not been enacted in this new avatar of policy reform.” 
— Surjit Bhalla, Economist

To celebrate this singular honour and to further the national discourse, a special panel discussion was organised during the 33rd Skoch Summit in New Delhi on September 3, 2013. The book, a collection of essays by accomplished experts, is as much a tribute to Chidambaram’s eloquent advocacy of economic freedom and the courage he displayed in implementing it, as it is about setting the agenda for the country’s next wave of reforms. This book has been edited by Sameer Kochhar, Chairman, Skoch Group. The authors of the essays in the book include Isher Judge Ahluwalia, Montek Singh Ahluwalia, Tarun Das, Ashok Jha, Vijay Kelkar, Sameer Kochhar, C Rangarajan, M Govindarao, Parthasarathy Shom, N K Singh, U K Sinha, D Subbah Rao, Y S P Thorat and Gursharan Dhanjal.

Wajahat Habibullah, Chairperson of the National Commission for Minorities and former Chief Information Commissioner, spoke eloquently about P Chidambaram, saying, “He is a man who has a very deep sympathy and commitment to those who are less fortunate than all of us.  In that consequence he devised what we had called Project Interact to bring education to such children.” The book, he said, not only “pays tribute to one who deserves it in many respects, but also sets an agenda for India’s growth in many useful and vital areas.” He dealt in detail about Chidambaram’s role in 1991 economic reforms’ process as a Commerce Minister and pointed out that “the readiness to give up discretionary power was a contribution of Mr Chidambaram in his role as minister for commerce.” This, he said, “with the then finance minister’s willingness to take a risk was what paved the way for the kind of reforms that came about and these reforms showed that our system was quite capable of delivering results when necessary.”

Surjit Bhalla, economist, said that it “very useful to have a book like this honouring somebody who has been at the forefront of reforms.” He though had a word of caution too: “I think it is useful to question a party that has him (Chidambaram) in two very important roles – twice as the finance minister and once as the home minister – as to why policies have not been enacted in this new avatar of policy reform.”

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“The readiness to give up discretionary power was a contribution of Mr Chidambaram in his role as minister for commerce... his willingness to take a risk was what paved the way for the kind of reforms that came about.” 
— Wajahat Habibullah, Chairperson, National Commission for Minorities

C Rangarajan, the Chairman of the Economic Advisory Council to the Prime Minister and former RBI Governor, said, “When the history of this period is written, I am quite sure that Mr Chidambaram will rank high as one of the principal architects of the liberalisation programme in this country.”  Dwelling on Chidambaram’s role in 1991 reforms, he said, “As minister for commerce he brought about significant changes in the trade policy. Controls were dismantled, tariff rates were brought down and the changes in trade policy were accompanied and supplemented by changes in the foreign exchange management which was my responsibility at that time and the exchange rate management underwent a thorough change.” Rangarajan further added, “Later as the finance minister he did almost an experimental economics showing that by lowering the rates of taxation actually the revenues can increase. People have talked about it but I think we had a practical experience of this under Mr Chidambaram.”

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“When you look at the state of water and sanitation you really realise why it is that we are not ready to sustain even 7 per cent growth. But the good news is that at least in the 12th plan they are talking of sustainable growth.” 
— Isher Judge Ahluwalia, Economist

Arun Maira, member of the Planning Commission, began by agreeing with an observation in Sameer Kochhar’s essay that Chidambaram was a man of action. “We in India have begun to expect that when Chidambaram is home minister then something will happen. When he is the finance minister, then something will happen,” Maira said. He shared an anecdote when discussions were being held on the 12th Plan. “I remember when Mr Chidambaram forced on us last year, just as we were going on to the 12th plan, that the numbers for all ministries needed to be substantially reduced. I remember the meeting when Montek announced… that you are all going to have to explain to your ministries that it is much less. He looked at me and said why are you smiling. I said, I am so happy because it is going to force us to concentrate on what, I think, we have been missing all these times.”

Isher Judge Ahluwalia, well-known economist, pointed out at dichotomy in approach to investment. “You may reduce the transaction cost of doing business to zero, but if you have cities in which you can’t move from one place to other; where your sewage is returned untreated into your water bodies; where there is sanitary conditions as such that every year we discover new viruses and new disease; where are we going to create that investment climate? We forgot about the other part of the investment climate, which is the ease of living in our cities and towns.”

Ahluwalia added, “When you look at the state of water and sanitation you really realise why it is that we are not ready to sustain even 7 per cent growth. Forget about 8 or 9 per cent growth, but the good news is that at least in the 12th plan they are talking not only a faster and more inclusive growth but they are talking of sustainable growth.”

On his part, Shekhar Gupta, Editor of Indian Express, lamented the falling standards of politics in the country. “Good economics has been replaced not just by cynical politics but very lazy politics.” This, according to him, was the reason the country has been floundering on the economic front. “Growth was called inclusive as if growth by itself is not inclusive…If you call something reform, shouldn’t it be presumed it has a human face.  By trying to qualify these, by trying to finesse these, in fact, it is the UPA which has put the clock back.”

The last couple of years have been challenging not only for India, but for the whole world. The policy agenda for bringing back India’s growth momentum has been outlined in detail in the 12th Plan. Most of the important points are also fairly comprehensively described in the different articles in this excellent volume. We have to deal with macro economic imbalances that have developed. We also have major challenges in key sectors such as energy, water, and land.

Infrastructure is today a key constraint with many large projects held up. Urbanisation is a new challenge which deserves greater attention. Clearly, as the Prime Minister said, our strategy must not only aim at faster growth but must also ensure that the growth processes are more inclusive.

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